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# supply function

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1. IN THE COMPETITVE MARKETFOR A CERTAIN SPICE, THE SUPPLY FUNCTION IS Qs =4P AND THE DEMAND FUNCTIOIN IS QD =300 -2P. "P" IS MEASURED IN POUND S PER DAY. (THE INVERSE SUPPLY AN DDEMAND FUNCTIONS ARE P =(1/4) QS AND P = 150 -0.5QD, RESPECTIVELY PART1. ARE THE LAWS OF DEMAND AN SSUPPLY SATISDFIED, IN THIS CASE? EXPLAIN PART2 SKETCH THE SUPPLY AND DEMAND CURVES IN THE SPACE BELOW, IDENTIFYING THE MARKET EQUILIBRIUM......

2. CONTINUING WITH THIS SAME INFORMATION.....A. DETERMINE THE MARKET EQUILIBRIUM. B. THE EQUILIBRIUM PRICE IS \$_____ PER POUND OF TEH SPICE C. THE EQUILIBRIUM QUANTITY IS_______POUND PER DAY. PART D. SUPPOSE IN THE ORDER TO PLEASE CONSUMERS , THE GOVERNMENT IMPOSED A PRICE CEILING OF \$40.00 ON THIS MARKET .....(1)ASSUMING THE PRICE CEILIING IS EFFECTIVELY ENFORCED, HOW MANY UNITS OF THIS PRODUCT WILL ACTUALLY BE PRODUCED AND SOLD?_____________POUNDS PER DAY
NEXT PART(SAME QUESTION) WITH PRODUCERS ONLY SELLING THE AMOUNT IN (1) , WHAT "ECONOMIC" PRICE WOULD CONSUMERS BE LIKELY TO PAY FOR THIS SPICE?_\$_________________________________PER POUND

QUESTION 3* NOW SUPPOSE THE GOVERNMENT IMPOSES AN EXCISE TAX OF \$6 PER POUND ON THIS SPICE....
-DETERMINE THE NEW EQUILIBRIUM IN THIS CASE (*HINT* LET Ps BE PRICE RECEIVED BY THE SELLER AND PD BE THE PRICE PAID BY THE BUYER. OBVIOUSLY , QD IS A FUNCTION OF PD, AND QS IS A FUNCTION OF Ps. THE TAX DRIVES A \$6 "WEDGE" BETWEEN THESE TWO PRICES : PD =PS + 6)
A. THE NEW EQUILIBRIUM QUANTITY IS_____________POUNDS PER DAY.
B. CONTINUING, TEH PRICE PAID BY THE CONSUMER IS \$_______ PER POUND.
C. AS A RESULT , WHAT HAS BEEN THE LOSS TO CONSUMERS AND PRODUCERS FROM THIS TAX (*HINT: MEASURE THE LOSS IN CONSUMER;'S SURPLUS).
CONSUMERS' LOSS\$_____________PERDAY
PRODUCERS' LOSS\$_____________PERDAY

D.CONTINUING, HOW MUCH TAX REVENUE IS THE GOVERNMENT COLLECTING FROM THIS TAX?? \$______________PER DAY

NEXT QUESTION

IN AN ENTIRELY SEPERATE CASE,WE HAVE OBSERVED THAT THE QUANTITY DEMANDED BY CONSUMERS OF A CERTAIN PRODUCT WAS AT 650UNITS PER DAY WHEN THE PRICE WAS \$20.00 PER UNIT, BUT WAS ONLY 350 UNITS PER DAY WHEN THE PRICE WAS \$30 PER UNIT.
1.ESTIMATE THE OWN PRICE ELASTICITY OF DEMAND FOR THIS PRODUCT. A. ELASTICITY =__________
B. IS THE DEMAND FOR THIS PRODUCT RELATIVELY ELASTIC OR INELASTIC, WITH RESPECT TO PRICE? _______________________
C. CONTINUING , USE THIS ESTIMATE OF THE OWN PRICE ELASTICITY OF DEMAND TO ESTIMATE THE PERCENT CHANGE IN REVENUE(* I.E. TOTAL CONSUMER SPENDING*) IF THE PRICE OF THIS PRODUCT, WHICH IS CURRENT LY \$25.00, WERE TO INCREASE BY \$1 (I.E., IF IT WERE TO INCREASE BY 4%).

WE WOULD PREDICT A ______% [INCREASE, DECREASE] IN REVENUE.

NEXT QUESTION
TEH HABEAS CORPORATION HAS ESTIMATED THE DEMAND FUNCTION FOR ITS PRODUCT TO BE THE FOLLOWING, WHERE QD IS THE QUANTITY DEMANDED(MEASURED IN TONS PER MONTH) AND P IS THE PRICE (MEASURED IN \$/TON).
QD = 6000 - 50P OR(P=120-0.02QD)

1.SUPPOSE HABEAS CHARGED A PRICE OF \$100/TON. HOW MANY TONS O FTHIS PRODUCT COULD HABEAS SELL AT THIS PRICE?______________TONS PER MONTH
2. CONTINUING FROM THE LAST QUESTION, AT THIS PRICE AND QUANTITIY THE OWN PRICE ELASTICITY OF DEMAND WOULD BE____________
3. CONTINUING, AT THIS PRICE AND QUANTITY, IF HABEAS WISHED TO RAISE MORE REVENUE (NOT PROFITS), SHOULD THYEY RAISE OR LOWER THE PRICE??? EXPLAIN
4. TOTAL REVENUE (NOT PROFIT0 FROM THIS PRODUCT WOULD REACH A MAXIMUM WHEN P =\$____PER TON AND QD= ______________TONS PER MONTH
OWN PRICE ELASTICITY OF DEMAND AT THIS POINT =____________________

NEXT QUESTION NOW , SUPPOSE THAT HABEAS CORPORATION CAN PRODUCE ITS GOOD AT A CONSTANT MARGINAL COST OF \$80.00 PER UNIT 8(SO TOTAL COST = 80Q, WHERE Q IS THE RATE OF OUTPUT). IF HABEAS WISHES TO MAXIMIZE *PROFITS* HOW MUCH SHOULD IT PRODUCE AND SELL??? *HINT MC=\$80.00
_________________TONS PER MONTH, AT A PRICE OF \$___________PER MONTH
PROFITS = \$ ____________PER MONTH

© BrainMass Inc. brainmass.com October 9, 2019, 8:25 pm ad1c9bdddf
https://brainmass.com/economics/elasticity/supply-function-150573

#### Solution Summary

The supply function is utilized.

\$2.19